Greyerz - High Net Worth Investors Pouring Money Into Gold

Today Egon von Greyerz spoke with King World News about high net worth investors who are continuing to invest in gold and move their existing gold outside of the banking system.  Greyerz, who is founder and managing partner at Matterhorn Asset Management out of Switzerland, also said the correction in the metals is over.

Here is what Greyerz had to say:  “Gold is at a weekly highly for 2012.  In my view we have probably seen the correction.  The action in gold and silver is very bullish.  They go up to higher levels, they consolidate at the higher levels, with a very small pullback, and then they move higher.  I see the next big move as being up.”

Egon von Greyerz continues:  

“Sure we can always have a correction, but that’s not what I see right now.  The fact that we are at a weekly closing high, if we close at these levels, is also bullish.  So I don’t see the short-term being bearish, Eric.  As a matter of fact, I see major upside moves in gold and silver over the next few weeks.

Interestingly, Deutsche Bank recently said their high net worth clients are buying physical gold.  Barclays is now finishing one of the biggest vaults in Europe, which will be used to house physical gold and other metals.... 

Continue reading the Egon von Greyerz interview below...

“But most investors don’t understand they are at massive risk by storing gold in the banks because many times the gold isn’t there.  We’ve seen examples of this ourselves, firsthand.  Also, even if the gold is there it could be encumbered.  So by having it in the banking system, people are exposing themselves to massive counterparty risk.

This is why we are continuing to see major investors moving physical gold out of the banking system, and into private vaults.  So the fear is increasing.  But still, by far, the largest amount of gold is stored at the banks.  But people must realize they aren’t safe in the banks.

It’s one of the easiest decisions for investors to make, to eliminate counterparty risk.  And when it comes to major currencies, the government issuing the currency is the counterparty risk.  Since we know that most governments are bust, and can only continue to operate by printing unlimited amounts of money, holding currencies now involves counterpary risk.

So the investment decision is so clear, hold physical gold and physical silver.  We should also note that 40% of the gold production in South Africa is shut down right now.  AngloGold is totally shut down in South Africa.  But even without that, gold is looking extremely bullish.  

We have most likely finished this small correction, and I believe gold will hit $2,000, and silver $50, this year.”

Greyerz also warned: “The next stage in this crisis is for currencies to start collapsing, and the dollar will be the next one to collapse.  As the dollar collapses, gold will obviously reflect that.  We are very near a situation where there will be a major premium for physical gold.  There will be a big difference in price between paper gold and physical gold. 

As the currencies fall, and gold goes higher, people will eventually realize that paper gold has no value because there’s no backing.  Why should a market that is absolutely paper, with no backing, cost about the same as the physical?

I would add that the printing we have seen, and the printing which has been recently announced, will be dwarfed by what we will see in the next few months and years.  We are talking about tens of trillions of dollars of money printing, at least.

When we get into the hyperinflationary situation, it could be hundreds of trillions of dollars being printed.  It is crystal clear that the only way for investors to protect themselves from the total destruction of paper wealth, will be through the ownership of physical gold and silver.

The ECB now has a balance sheet of four trillion euros, but they have lent or guaranteed twelve trillion euros.  So it’s a twelve trillion euro balance sheet, and it’s all rubbish what they have on their balance sheet.  They are bust.

It’s the same thing with the UK banking system.  The UK banking system is one of the most highly leveraged banking systems in the world.  The Bank of England’s balance sheet has increased five fold over the last five years.

The same is true for Switzerland.  The Swiss Central Bank’s balance sheet has expanded almost five fold over the last five years, and the top two Swiss banks represent 700% of Swiss GDP.  This means that Switzerland is in real danger of getting into a hyperinflationary situation.  I don’t think the Swiss franc is better than any other currency.  So there is tremendous danger around the world as we head into the next stage of this crisis.  

The bottom line is as this global financial collapse accelerates, more and more investors will seek the shelter of physical gold and silver.  This will cause a massive spike in the price of these metals as investors flood into these tiny markets.  And I say these markets are tiny because the amount of ‘available’ physical metal is very tiny indeed.”